India and China’s GDP Components Over Time

This should go without saying, but ask yourself if you are able to recreate these charts given the data sources mentioned in the tweet. You needn’t use DataWrapper necessarily (although if you’re considering journalism or a related field, learning it will help) – but do see if you can create the chart!

Bibek Debroy on loopholes in the CPC

That’s the Civil Procedure Code.

The average person will not have heard of Dipali Biswas or Nirmalendu Mukherjee and may not be aware of the case decided by the Supreme Court on October 5, 2021. The case was decided by a division bench, consisting of Hemant Gupta and V Ramasubramanian and the judgment was authored by Justice V Ramasubramanian. Justice Ramasubramanian observed (not part of the judgment), “Not to be put off by repeated failures, the appellants herein, like the tireless Vikramaditya, who made repeated attempts to capture Betal, started the present round and hopefully the final round.” Other than smiling about a case that took 50 years to be resolved and making wisecracks about “tareekh pe tareekh”, shouldn’t we be concerned about rules and procedures (all in the name of natural justice) that permit a travesty of justice?

https://indianexpress.com/article/opinion/columns/civil-procedure-code-loopholes-justice-delay-7617291/

I know (alas) next to nothing about the law, but there were two excerpts in this article that I wanted to highlight as a student of statistics and economics. We’ll go with statistics first.

Whenever I start to teach a new course, I always tell my students that there are two kinds of errors I can make. I can either make sure that I complete the syllabus, irrespective of whether everybody has understood it or not. Or I can make sure that everybody has understood whatever I have taught, irrespective of whether the syllabus is completed or not. Speed versus thoroughness, if you will – and both cannot be optimized for at the same time. If you’re wondering, I prefer to err on the side of making sure everybody has understood, even if it comes at the cost of an incomplete syllabus.

This is, of course, closely related to formulating the null hypothesis and asking which type of error one would rather avoid. And the reason I bring it up, is because of this exceprt:

Innumerable judgments have quoted the maxim, “justice hurried is justice buried”. By the same token, justice tarried is also justice buried and inordinate delays mean the legal system doesn’t provide adequate deterrence to mala fide action. In my view, for most civil cases, the moment issues are framed, one can predict the outcome within a range, with a reasonable degree of certainty. (Obviously, I don’t mean constitutional cases before the Supreme Court.) With no disrespect to the legal system, I think AI (artificial intelligence) is capable of delivering judgments in such cases, freeing court time for non-trivial cases.

https://indianexpress.com/article/opinion/columns/civil-procedure-code-loopholes-justice-delay-7617291/

“Justice hurried is justice buried” and “Justice tarried is justice buried” are both problems, and optimizing for one means not optimizing for the other. What Bibek Debroy is saying here is that what we have ended up choosing to optimize for the former. We make sure that every case has the opportunity to be heard at great length, and with sufficient maneuvering room for both parties.

And that’s great, but the opportunity cost is the fact that sometimes judgments can take over fifty years (and counting!).

And what is Bibek Debroy’s solution? When he suggests that AI is capable of delivering judgments in such cases, he is not saying that the AI will give a perfect judgment every time. He is not even saying that one should use AI (I think the point is rhetorical, although of course I could be wrong). He is saying that the gains in efficiency are worth the occasional case being incorrectly judged. In other words, he is optimizing for justice tarried is also justice buried – he would rather avoid the error of taking up too much time for each case, and would (presumably) be fine paying the price of having the occasional case being misjudged.

It is up to you to agree or disagree with him, or with me when it comes to how I conduct classes. But all of us should be cognizant of the opportunity costs when we decide which error we’d rather avoid!


And economics second:

Litigants and lawyers (at least on one side of a civil case) have no incentive to finish a case fast (Does the judiciary have it?).

https://indianexpress.com/article/opinion/columns/civil-procedure-code-loopholes-justice-delay-7617291/

This is more of a question (or rumination) on my part – what are the incentives of the judiciary? I can imagine scenarios in which those “on one side of a civil case” can use both official rules and underhanded stratagems to delay the eventual judgment. And since there is no incentivization in terms of speedier resolutions, are we just left with a system that is geared towards moving along ponderously forever more?

And if so, how might this be changed for the better? This is, and I’m not joking, (more than) a trillion dollar question.


And finally, as a bonus, culture:

My friend Murali Neelakantan makes the point here that isn’t really about incentive design at all, that the problem is more rooted in how we, the people of India, use and abuse the provisions of the CPC.

That takes me into even deeper and ever more unfamiliar waters, so I shall think more about this before trying to write about it!

Improving the Quality of Social Science Research in India

Gulzar Natarajan points us towards an excellent paper written by Jacob Greenspon and Dani Rodrik, on who is writing papers in top tier journals today.

Developing country representation has risen fastest at journals rated 100th or lower, while it has barely increased in journals rated 25th or higher.

Click to access a_note_on_the_global_distribution_of_authorship_102521.pdf

Take a look at the table below, and note how developing country authorship has barely budged from 3.5% to 4.4% across the two time periods the authors have chosen to work with.

https://drodrik.scholar.harvard.edu/files/dani-rodrik/files/a_note_on_the_global_distribution_of_authorship_102521.pdf

What is the problem being addressed here? The fact that there isn’t enough representation in the very top tier journals of authors from developing nations.

How might this problem be resolved? In one of two ways: either the current top tier journals figure out a way to have more representation from developing countries, or developing countries start on the (rather long) journey of creating journals that will replace the ones currently at the top.

In his blogpost, Gulzar Natarajan points out nine ways in which both of these solutions might be implemented:

  1. Hire more local Principal Investigators, both for its own sake, but also because of the large positive externalities they will generate
  2. Develop academic consortium(s) such as NBER in developing countries. Gulzar Natarajan uses the example of India, but this could of course be done in many other countries as well
  3. Give more personalized, contextualized lectures in Indian universities
  4. More mentorships
  5. More referees from India in top tier publications, at least for “India” papers. (Note again that Gulzar Natarajan is writing this for an Indian audience, the same applies for other countries)
  6. Create and share data repositories.
  7. Build out better conferences.
  8. Build out more university level tie-ups on an international basis
  9. Build out better Institutional Review Board certifications for local Indian universities.

The author is kind enough to mention the place at which I currently work (the Gokhale Institute of Politics and Economics) as an Institute which may be able to play a role in furthering this initiative.

We’ve tried to do work on some of the initiatives he has outlined, including building out on mentorships, trying to build out better (and more) university level tie-ups, and one of the few silver linings to the last eighteen months has been the fact that it has never been easier to get professors from the world over to “come” and speak via video conference. But much more – much, much more! – remains to be done.


In an ideal world, each university in India would have a faculty member whose sole full time job it would be to figure out how each university is working on each of these nine points, with some sort of a coordinating agency working with (and across) each participating university. This is, of course, easier said than done.

Its necessity, if you ask me, is indisputable.

The Vajpayee Moment in Telecom, IO and Porter’s Five Forces

Vijay Kelkar and Niranjan Rajadhakshya had on op-ed out in Livemint recently on the mess in the telecom sector, and their suggestions for (at least partially) resolving it:

It has been about a year since the Supreme Court instructed telecom companies to share not just their core telecom revenues with the government, but also to take into account promotional offers to consumers, income from the sale of assets, bad debts that were written off, and dealer commissions. The apex court has allowed the affected telecom companies to make a small upfront payment and then pay their excess AGR dues to the government in ten annual instalments, from fiscal year 2021-22 to 2030-31, in an attempt to ease their immediate burden, which has raised concerns about the financial stability of Bharti Airtel and Vodafone Idea. Analysts estimate that the extra annual payments by all telecom firms could be around ₹22,000 crore a year.

https://www.livemint.com/opinion/online-views/a-new-vajpayee-moment-for-the-troubled-indian-telecom-sector-11631123688457.html

Their suggestions for the resolution of this problem involve the issuance of zero-coupon bonds by the telecom companies, along with an option for the government to acquire a 10% equity stake. As always, please read the whole thing.


Now, this may work, this may not work. The more I try to read about this issue, the more pessimistic I get about a workable solution. But we’re not going to get into the issue of finding a “workable” solution today. We’re going to learn about how to think about this issue.

That is, what model/framework should we be using to assess a situation such as this? Kelkar and Rajadhakshya obviously have a model in mind, and they hint at it in this excerpt:

There are three broad policy concerns that need to be addressed in the context of the telecom sector: consumer welfare, competition and financial stability. Possible tariff hikes to generate extra revenues to meet AGR commitments will hurt consumer access. The inability to charge consumers more could mean that the three-player telecom market becomes a duopoly, through either a firm’s failure or acquisition. The banks that have lent to domestic telecom companies are also worried about their exposure in case AGR dues overwhelm the operating cash flows of these companies.

https://www.livemint.com/opinion/online-views/a-new-vajpayee-moment-for-the-troubled-indian-telecom-sector-11631123688457.html

So a solution is necessary, they say, because we need to have a stable telecom market that doesn’t hurt

a) the consumers,

b) the current players in this sector and

c) the financial sector that has exposure in terms of loans to the telecom sector

To this list I would add the following:

d) make sure the government doesn’t get a raw deal (and raw is a tricky, contentious and vague word to use here, but we’ll go with it for now)

e) make sure new entrants aren’t deterred from entering this space (if and when that will happen)

f) suppliers to the telecom sector shouldn’t be negatively impacted

In other words, any solution to the problem must be as fair as possible to all involved parties, shouldn’t change the status quo far too much in any direction, shouldn’t hinder the entry of new competition, and should give as fair a deal as possible to consumers.


Take a look at this diagram:

https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis#/media/File:Elements_of_Industry_Structure.svg (Credit: Denis Fadeev)

Students who are familiar with marketing theory are going to roll their eyes at this, but for the blissfully uninitiated, this is the famous Five Forces Analysis.

Porter’s Five Forces Framework is a method for analysing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack thereof) of an industry in terms of its profitability.

https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis

Michael Porter’s Five Forces Framework can be traced back to the structure-conduct-performance paradigm, so in a sense, it really is an industrial organization framework:

In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perfectly competitive model, complications such as transaction costs, limited information, and barriers to entry of new firms that may be associated with imperfect competition. It analyzes determinants of firm and market organization and behavior on a continuum between competition and monopoly, including from government actions.

https://en.wikipedia.org/wiki/Industrial_organization

The point is that if you are a student trying to think through this (or any other problem of a similar nature), you should have a model/framework in mind. “If I am going to recommend policy X”, you should be thinking to yourself, “how will that impact Jio? Airtel? Vi? How will that impact government revenues? What signals will I be sending to potential market entrants? Will consumers be better off, and if so, are we saying that they will be better off in the short run, or on a more sustainable basis?”

Now sure, the diagram doesn’t include government, but the Wikipedia article on the Five Forces does speak about it later, as does the excerpt above from the Wikipedia article on Industrial Organization. More importantly, this framework gives one the impression that we’re dealing with a static problem, with no considerations given for time.

I would urge you to think about time, always, as a student of economics. Whether it be the circular flow of income diagram, or the five forces diagram, remember that your actions will have repercussions on the industry in question not just today, but for some time to come.


So whether you’re the one coming up with a solution, or you’re the one evaluating somebody else’s solution, you should always be evaluating these solutions with some framework in your mind. And tweaking the Five Forces model to suit your requirements is a good place to start!

Ashwini Deshpande interviewed by Scroll.in

We were lucky enough to get the chance to speak with Alex Thomas on Friday, and the video of the conversation should be up on YouTube soon enough. In a wonderful coincidence, Scroll.in published an interview with Ashwini Deshpande just a day later. It is a coincidence (to me) because Alex’s textbook is the first macro textbook that I read that speaks extensively about caste, gender and ecology.

Who is Ashwini Deshpande? An economist, currently with Ashoka University, Ashwini Deshpande has been working for a while on the economics of discrimination and affirmative action. The interview, conducted by Rohan Venkat, is a fun and instructive (and what a rare combination that is!) read on both the arc of Ashwini Deshpande’s career, and also on the work that she has done, and is currently doing.


Here’s an excerpt from a different source, before we get to the Scroll interview:

There’s a lovely new working paper by Ashwini Deshpande and Jitendra Singh on female labor force participation in India. We talked a little bit about this last time. Our last conversation was about the honor-income tradeoff, how there are all these things at home that are holding women back: public safety issues, child care issues.
They find something quite remarkable, which is that they don’t find much evidence of supply-side demographic characteristics, like household income, structure, motherhood or timing of childbirth, et cetera, to be very significant in the labor force participation. In fact, it has an effect on the level, but it’s not like the timing of the childbirth—you see this big drop-off and then they come back to the labor force and so on. They find that it’s mostly demand-driven, that actually female labor force participation is so low in India because the demand for women is very low.
There’s a second finding that they have. It’s bad news for India going into the immediate future, which is adverse economic shocks actually make this problem worse. Because a lot of the lack of demand or the fallen demand for female labor is because they’re getting displaced by the employment of male workers.
They find that when there’s an economic shock, like demonetization or current COVID constraints and things like that, you see women being driven out of the labor force.

https://www.discoursemagazine.com/culture-and-society/2021/09/16/ideas-of-india-female-friendships-and-fraternal-capital/

Why this excerpt? Well, as a young student, you often get to hear that economists are working on topic “x”, or feature “y” – and when you start to read the work itself, one tends to miss out on asking the big picture questions. This exceprt, I think, helps you focus on just that: the big picture question.

What is the big picture question, you ask? Simple: is women’s participation in the labor workforce so low because the supply is low? Or because demand for labor supplied by women is low? Or both? And how does one go about answering this question? So yes, the age at which women get married, how much education they receive, and cultural impediments to they working are all factors to be considered – but hey, maybe there just is a preference to hire males instead of females as well?

It goes without saying: read the paper, but this should help you read it better 🙂


The first part of the interview is about how Ashwini Deshpande got into this field of research, and is useful reading to understand the role of “luck” in the development of your research interests, and also to understand the resistance to change in terms of new research areas for economics twenty to thirty years ago.

There are a lot of interesting points in the interview, such as, for example, problems with recording women’s work better than is done right now (and what happens if it is not recorded correctly). There’s stuff in there about the lack of meaningful linkages between women’s education levels and the jobs that ought to become available as a consequence – and this could be because of (a lack of) sanitation, and increased mechanization on farms, among other things.

The interview is also useful reading because it introduces you to the so-called “Indian enigma“. (Please read “Where India Goes” if you haven’t already, and here’s an old review of the book on EFE.)

Here’s a chart from her paper that posits a different explanation (I’ve copied it from the Scroll interview, but it is from the paper as cited below):

UC: Upper Caste, SC-ST: Scheduled Castes, Schedules Tribes, OBC: Other Backward Classes. Credit: Ramachandran, Deshpande, The Impact of Caste: A Missing Link in the Literature on Stunting in India

We found that regions where the self-reported practice of untouchability was higher, the child height for upper caste children was unaffected, which means that, for example, Brahmin children were not shorter, compared to regions where untouchability was lower. But the average height of Dalit children was shorter in areas with higher practice of untouchability, compared to heights in areas with lower prevalence of untouchability.
That gives us a mechanism about how stigmatisation and social ostracism might affect child height. The fact that you have to be at the end of the queue in terms of receiving social services, maybe you get excluded actively. There’s a whole set of social and economic processes which either completely exclude these children or put them at the end of the queue.
What this suggests is that the greater prevalence of societal discrimination is associated with a worsening of the stunting problem.

https://thepoliticalfix.substack.com/p/interview-ashwini-deshpande-on-the

Now, you may agree, or you may disagree with her assessment – and that, of course, is more than absolutely fine. The idea, especially if you are a young student starting out on a voyage of discovery in the field of economics, isn’t to either form or change your opinion. It’s awesome to have opinions, and it’s awesome-r to have it change because of something you read or learn. But for the moment, to be informed about this body of work, and to go through it, would be a very good place to start.

As Ashwini Deshpande herself says in the interview:

Sometimes no number of facts can make people change their minds. Some people already have their minds made up. But such people are at the extremes. I believe a very large number of people believe in something because they don’t know better. They’ve just never been exposed to another way of thinking, another way of looking.
The idea is to expand that community of people. Reach out to the people who believe in something, maybe very strongly, but that’s only because that’s all they’ve ever heard. What CEDA is trying to do is to create an evidence base which is accessible. You can always produce evidence that is so obscure and so difficult to understand that nobody would want to engage with it.
But what we are trying to do at CEDA is, through pictures, through little data narratives, through short pieces, to summarise issues in a way that a lay person will find accessible. It’s like a ball that you set into motion, and hopefully it will spread to more and more people.
The more the number of institutions or portals that allow people access to data and debates in a democratic manner, the better.

https://thepoliticalfix.substack.com/p/interview-ashwini-deshpande-on-the

There are some great recommendations at the end of the interview, both to read and to view, and if you haven’t consumed them already, you have your work cut out for you.

If you are interested in reading more about Ashwini Deshpande, here is her CV, here is her faculty page, and here is her Twitter profile. A word of advice: do not click open her Twitter profile if you are feeling hungry. You can thank me later. 🙂

On Serendipity, Housing and a Request

Just the other day (the 15th of September, if we want to be exact), a student from GIPE sent across a video that I found to be very interesting. So interesting, in fact, that I scheduled it for this coming Sunday’s post. It is about housing in Singapore, and I’ll leave it at that for the moment.

And then, just yesterday, I finally got around to reading some of Shruti Rajagopalan’s interviews of doctoral candidates and postdoctoral researchers for her excellent podcast: Ideas of India. The third interview in the series is of Tanu Kumar, a postdoctoral fellow at William & Mary’s Global Research Institute.

That’s where the serendipity bit in the title of today’s post comes in – the interview is in some ways closely related to the video. (Interesting aside about the etymology of the word serendipity. Got nothing to do with anything, but hey, it’s Friday)


Tanu Kumar’s paper is about housing subsidy programs, and how they might affect political behavior. The paper is about the effects of a housing subsidy program in Mumbai, and local political participation, it would seem, went up among the beneficiaries of the program.

Just a broad overview of this paper is that the Indian government—and actually, governments everywhere—they invest a lot in making housing affordable and accessible to lower-income residents. So, I wanted to understand how these programs actually affect beneficiaries and shape their behavior and their decision-making.
Because these programs are such a large scale—maybe even 5 percent or more of the Indian population benefits from them—any effects on political behavior would have implications for the broader political landscape. What I find is really in line with what you just said—benefiting from a subsidized housing program in Mumbai makes people more politically active at the local level. They’re more likely to complain about local services, attend meetings about local public issues, and they also know more about local politics.
What’s particularly interesting is that they actually care more about local-level community issues like water, electricity, and sanitation. This is different from what we’ve seen in the past, where we find the people who benefit from different programs might participate less in politics. And the difference here is the outcomes that I focus on. I’m focusing more on, really, everyday politics, everyday making of complaints and stuff in cities to make services better as opposed to voting and turnout.

https://www.discoursemagazine.com/politics/2020/12/24/ideas-of-india-how-does-subsidizing-housing-prices-shape-political-behavior/

Read the whole thing, but the reason I found the discussion so interesting is because my intuitive guess would have been that political engagement will go down, not up after getting the benefits of a subsidy such as this. Tanu Kumar thinks that one reason political engagement at the local level is going up is because people have more capacity (time) to spend on these issues.

RAJAGOPALAN: What do you think is driving this? Is it because now people have succeeded once through winning the lottery for subsidized housing that it changes their perception of what is possible in terms of the interaction with the state? Is it that now the need for housing has been satisfied, they push their clientelist efforts towards getting other things?
Is it a locational thing? Now that the housing problem has been solved, they are geographically fixed, but they’re also fixed electorally. Now they know that they are constituents of a certain group of people, and maybe now they want to push more, given the geographical elements. Maybe some of these things wouldn’t transfer if it were a different kind of subsidy which wasn’t so geographically rooted. What do you think is driving this push for greater participation?

KUMAR: There could be many different things going on. It would probably vary across the whole population. But what I think is actually going on is two things. First of all, people have greater political capacity. They’re wealthier. They have more time.
I don’t really see more political participation across the board, but I actually see it targeted in a very specific way, like targeted around local, very community-level services. There is probably some element of having better expectations or changed expectations of what the government might provide, but it’s also action that’s very motivated by protecting the value of these homes, is what I argue.

https://www.discoursemagazine.com/politics/2020/12/24/ideas-of-india-how-does-subsidizing-housing-prices-shape-political-behavior/

I have two questions. First, it is interesting that the beneficiaries choose to spend their greater capacity (time or money) on local political issues rather than elsewhere. Why might this be?

Tanu Kumar in a way answers this question, for she says that folks are motivated to protect the value of these homes. What I find fascinating is that if this is true, then the beneficiaries truly believe that the best way of protecting the value of these homes is through greater involvement in local politics – which is a Very Very Good Thing Indeed.

And my second question: if it really is skin in the game that is at play – and that is the simplest way to think about this, correct? – then how should we think about doing more about it at the local grassroots level? And not just for housing, but other goods?

Which brings me to the last part of the title of today’s post…


Do any of you know where I might get to read more about whether involvement in local politics goes up given public housing subsidies? Did this happen in Singapore? In Hong Kong? In other parts of the world?

If yes, it would make the argument for subsidies in public housing (among other things) even stronger, and that is a topic worth thinking about, no?

A Review of Macroeconomics: An Introduction, by Alex M Thomas

I’m not a fan of recommending a particular textbook to my students in any course that I teach. I’m not a fan of textbooks in general, but that’s a story for another day.

The reason I am against the idea that you should read “a” textbook for a course is because I find the idea that you can learn a subject by reading just one book to be a deeply repugnant one. I’m happy to recommend ten, or more. And students should learn by dipping into all of them!


But if you were to put a gun to my head and tell me that I must absolutely recommend just one macro text for Indian students who are learning macro for the first time, A Review of Macroeconomics: An Introduction, by Alex M Thomas would be it.

Why? For the following reasons:

Rare is the textbook that begins with a disclaimer to the effect that the author did not want to write a textbook. Rarer still is the preface that goes on to say that other textbooks (and more besides!) should also be read. If you are an econ prof, you must have read multiple prefaces by now that dispense advice about how chapters such-to-such, followed by chapters these-to-those ought to be included in an introductory course, but on the other hand chapters extra-but-still-necessary only need be included in an intermediate course.

The preface to this book does no such thing. Read the whole book, it says, and read more besides.

But the second most important part of the preface, and the part that got me hooked to the whole book is that includes a reference to a novel. That in itself is, well, novel. Second, it is an Indian novel. Third, it is a novel that has nothing to do with macroeconomic theory. This is a book that teaches you that macroeconomic theory – that after all, is the job of a textbook – but it is also a book that teaches you what to do with that theory. It teaches you to apply that theory to get a handle on the society that you need to study, and it helps you understand that this society is so much more than the abstractions of economic theory. Use this book to appreciate life better, it seems to say. Or, in the language of us economists, Alex Thomas has written the book as a complement to everything else that you will read and learn about Indian society. Not as a substitute. That is a rare old achievement, and one well worth celebrating.

The most important part?

Finally, this book adopts a problem-setting approach rather than a problem-solving one, as is the case with most economics textbooks. To put it more clearly, this text helps you to identify, conceptualize and discipline a macroeconomic problem. Therefore, this book does not contain exercises in problem solving, but it contains discussions and questions that make you think about the nature of assumptions, the logic of the theory, the limits of the theory, the interface between theory and policy, a little about the gaps between theory and data, and occasionally, the nature of past and present economic thought.

Preface, pp xvi, Macroeconomics An Introduction

There are nine chapters in the book, and I hope Alex Thomas won’t mind me listing them out over here:

  1. What is economics?
  2. Conceptualising the macroeconomy
  3. Money and interest rates
  4. Output and employment levels
  5. Economic growth
  6. Why economic theory matters
  7. The policy objectives of full employment
  8. The policy objective of low inflation
  9. Towards good economics

Say you want to teach a course in macroeconomics to students who have not studied the subject before. Conceptually speaking, here are the questions I would want to answer as an instructor:

What are we studying here, exactly? What are we abstracting from all of reality and of those abstractions, which features matter more than the others? Why are we studying whatever it is that we’re studying? If we (students and the prof) agree on the answers to the first few questions, how do we go about defining and measuring “success”? Why put the word success in inverted quotes?

Chapter 1 | Chapters 2,3,4 | Chapters 5 and 6 | Chapters 7 and 8 | Chapter 9 is how I interpret the layout of the book, in line with the questions above. Personally, I would have wanted to put chapters 5 and 6 right after chapter 1, but after having read the book, I can understand why the book was structured the way it has been. In particular, the four sections of the sixth chapter can only become truly comprehensible after you’ve gone through chapters 2,3,4. If I were to be teaching a course on macro, I would still be tempted to jump from 1 to at least the spirit of chapters 5 and 6, but that’s just my personal preference at play. Growth matters, and helping students appreciate why growth matters can be hugely motivating.


This book deserves a separate section of the review dedicated exclusively to the richness of the text. I challenge you to find me another textbook, from anywhere in the world that can go from talking about Tony Aspromourgo’s chapter on Piero Sraffa on pp 100, to talking about a Telugu novella on pp 102 (Kesava Reddy’s Moogavani Pillanagrovi: Ballad of Ontillu, 2013) to talking about Shrilal Shukla’s Raag Darbari on pp 103! To be clear, the challenge isn’t finding another textbook that talks of these three sources specifically (I can guarantee you that there isn’t another one!), but one that manages to traverse such breadth. Breathtaking stuff, and I never imagined I would use that phrase while reviewing a macro text.

But it’s not just that one series of excerpts. Every chapter is liberally sprinkled with a list of reading recommendations that stand out for their sheer breadth. All of them have been listed out between pages 200-208 in the text, and just these eight pages alone are worth the price of admission. Well, these eight pages and the two that precede it. In those two pages, Alex Thomas lists out all the data sources that have been used in the case of each table from each chapter.

In particular, this book deserves to be praised for raising repeatedly issues of caste, gender and ecology at various points through the text. Growth, but at what cost? Land as a factor of production, sure, but rooted in which society, and with therefore what consequences?

Consider this excerpt from pp 128, for example:

A village economy cannot be understood as a simple departure from the competitive macroeconomy we have discussed thus far. It requires us to understand how village space is divided and demarcated (typically on the basis of caste). The spatial inequality present in a village economy is captured very well by Kota Neelima in her depiction of a poor and indebted farmer’s house in Death of a Moneylender (2016).

The very next paragraph touches upon aspects of religion and its linkages to labor mobility. As always reasonable people can and should argue about how much of an impact these aspects (and other aspects of Indian society) have on the cold austere ivory tower approach that most macroeconomic textbooks adopt. I think it is a very significant impact, and you may not – and that is, of course, absolutely fine. But we are debating the quantum of significance and relevance, not questioning its very existence – and that is very, very welcome indeed.

Indeed, this is a book that ends with an exhortation: if you take one thing away from this book, Alex Thomas seems to be saying, take away an appreciation for the pluralistic approach (pp 196):

If you are a student of economics, you will soon study “statistics for economists’ and ‘mathematics for economists’. In both these methods of economics, there exist multiple concepts, theories and approaches, just like in macroeconomics and microeconomics; pay attention to the fact that these ‘methods of economics themselves both originated and are used within a social context. Moreover, a pluralistic approach to economics by itself is not sufficient when employing economics in the service of public policy; it is important to keep in mind the collective wishes of people as Xaxa’s poem in Section 1.4 pointed out.
I end this book with the hope that you take pluralism as a friend, sometimes a difficult one, in your journey of learning.


The pluralistic approach isn’t just restricted to moving across (and beyond) the social sciences. Even within the domain of macroeconomic theory, Alex Thomas takes the time and trouble to make sure that all views about the macroeconomy are fairly represented. The fifth chapter in particular is notable for this, but that should be taken to be especial praise for that chapter, not a faint damning of the others!

What could have been done better? If this book is intended for people learning about macroeconomics for the first time, I think this books errs on the side of doing a little bit too much. Some sections might be a little bit too involved for a reader who still has to cultivate a taste for macroeconomic theory (and god knows it is very much an acquired taste). And some first time readers might also not appreciate some of the macroeconomic controversies and the role they have played in pushing the field further.

This should beg the obvious question: well, what, exactly, should be cut? Well, not cut exactly, but some of the more involved explanations can be turned into, say, accompanying YouTube explainers (about which more below).

There are also some notable names missing from an introductory text of macroeconomics, but I’m all but certain that this is a case of conscious choice rather than inadvertent omission.

A tip to the students reading this review: help Alex out by coming up with videos that will act as accompaniments to the text. That is, if you are doing the hard work of reading through the text and understanding it, help others by creating content that will act as a complement to the reading of the text. Many students should do this, and in many languages! As Alex says, embrace plurality, both in terms of approach and understanding, but also linguistically speaking.


My biggest problem with the book is a bit of a meta-problem, and I hope I turn out to be wrong in what I am about to say. The biggest requirement, I think, of this book is a teacher who will do it justice. I honestly do not think that this book can be read by a first-time student of macroeconomics without some sort of mentoring and guidance. To be clear, this is not about the book being difficult or inaccessible – I am of the opinion that macroeconomics just is that hard.

But if what I’m saying is correct, then the success of the book is as dependent on the guide/mentor/professor as it is upon both the book and the reader. And that brings me to my answer to whether or not I would recommend that you read this book. It is not, I think, for everybody. But that’s not a criticism of the book, or its contents or the author. It is an acknowledgment of just how hard macroeconomics really is. In fact, Alex Thomas himself says that a year of undergrad studies in economics is recommended before you tackle this book.

But hey, hopefully I turn out to be wrong! Hopefully you can and will read this book and understand it.

And if you are already a serious student of economics (whether formally enrolled in a university or otherwise), then I absolutely and unreservedly recommend this book to you. As a student of Indian macroeconomics, you simply couldn’t do better. Period.


P.S. Alex Thomas will be speaking about his book to the students from the Gokhale Institute on the 17th of September. I don’t think livestreaming is possible, alas, but we will be putting up the recording on our YouTube channel for sure. If you have questions you’d like to ask Alex Thomas, pass them along here in the comments. We’ll try to work them in!

What Year in History? A Fun Way to Understand Development in India

Ajay Shah, Renuka Sane and Ananya Goyal have a very interesting blogpost out, the title of which is “What year in the history of an advanced economy is like India today?”

India has been stepping out from poverty into middle income. It is estimated that the proportion of persons below the PPP$1.90 poverty line has dropped to an estimated 87 million in 2020. In thinking about India’s journey, it is interesting to ask: In the historical journey of advanced economies, What year in the history of the US or UK roughly corresponds to India of 2021? This is a good way to obtain intuition on where India is, in the development journey.

https://blog.theleapjournal.org/2021/08/what-year-in-history-of-advanced.html

It’s a good blogpost, and the section before they get to comparisons about GDP is worth reading in full, because they come up with a good set of warnings about overdoing analysis like this. Read it, but we’ll get down to the fun part right away. As they mention in the blogpost, India today is at about 6800 dollars per person in terms of GDP, adjusted for PPP and inflation. When in its history was the UK at this point? What about the US? Well, the blogpost gives the answers, but I prefer to show you screenshots of my favorite software, Gapminder:

And I won’t show you the United States here, but it’s around the same point – the late 1800’s, in effect. Or put another way, if you want to use a this very simple way of asking how long to go before we reach the same level of per capita GDP as the United States, we have about 140 years to go.


And Gapminder, of course, has the ability to allow you to do this for every single metric that is available on the software. The blogpost written by Ajay Shah, Renuka Sane and Ananya Goyal speaks about asset ownership and women’s labor participation as other things to compare India’s current level of development with America’s past – but you can, of course, take a look at whichever metric you want.

This blogpost reminded me of a chart that The Economist had come up with earlier:

https://www.economist.com/graphic-detail/2011/10/03/chasing-the-dragon

As with many charts from The Economist, it takes a while to get what is going on, but the chart is worth that effort. Here’s a quick explanation to get you started: life expectancy at birth for China is 73. India is at 65. And China was at 65 36 years ago. Once you get this, the other rows in the chart become easy to interpret. Note that this chart was published by The Economist a decade ago.


These sort of analyses are fun, but of course one shouldn’t take them too seriously. There are other things that are at play beyond the data points that are worth taking into account, but are difficult to quantify. And most notable among these is culture.

That is, sure, China was at 65 in terms of life expectancy 36 years ago, but that doesn’t necessarily mean that we will take even approximately the same amount of time to reach 73. Could be lesser, could be more – and that because of changing technology, different culture, different political structures, different – well, a whole host of things.

But this much is true: both the blogpost that I cited and the chart above shows that we have, as the poet put it, miles to go before we sleep.


By the way, a fun exercise if you are a student today is to see if you can recreate The Economist’s chart updated with today’s numbers. Give it a shot, why don’t you?

Learning to Ask Better Questions

Apologies about not writing yesterday, but life has been pretty busy in myriad ways.

Today’s post is a bit of a cop-out, in the sense that I’m simply putting up a list of questions that I got to ask Tyler Cowen today. The call lasted for an hour, and it was every bit as fantastic as I’d hoped it would be.

I haven’t edited the list of questions at all, and the reason I’m putting them up here is because:

  1. Most (but not all) of the questions were related to blogposts he has written, and you may want to read them
  2. Help me learn how the questions could have been better, and what else I could have asked
  3. Hopefully, some of you get inspired to ask better questions!

On Philosophy and Economics and Opportunity Costs (16 minutes)

  1. What has been the opportunity cost to the field of philosophy for you having chosen to study and teach, but especially specialize in, economics?
    1. If one agrees with the central thesis of Stubborn Attachments, should more people be asking themselves this question? And if yes, is it better to ask this question early on in life, or later?
  2. If economics is the study of how to get the most out of life, how should individuals think about what most means to them? Is that a useful way to start thinking about philosophy if you’re an undergrad econ student?
  3. In your ideal university, “Teachers would be compensated on the basis of how many students they could attract, in a manner suggested long ago by Adam Smith, who himself lived under such a system in 18th-century Scotland.” My question is related to another recent blog post of yours: how did Adam Smith and his students think about the elasticity of demand? If we were to implement a system like this today (and god knows I would love to), how should we be thinking about the elasticity of demand?
  4. What has Songdo taught you about urbanization, and what has George Mason’s presence in Songdo taught you about the internationalization of American education?
    1. Which is the model that excites you the most in American education today: Minerva, Harvard or Arizona State University? 
    2. What should other countries be learning from whichever model you picked?
  5. Tim Ferriss famously  rejected an MBA and used that money to learn by investing in start-ups after moving to San Franscisco. David Perell is notably against the kind of education that we deliver in universities, and schools today. David and Seth Godin have working models of what alternative methods of delivering learning might look like. Will the future be more a case of universities looking more like these models, to some extent, or these models looking more like universities?
    1. What would you want to add to David’s liberal arts essay? 
      1. Some cross-subsidization of the non-liberal-arts education by the liberal arts students, intra or inter-personal?
    2. You’d mentioned in a blogpost in 2006 that “there is something about having the person right in front of your face that triggers your biological “pay attention” alert mechanisms”, and that you weren’t in favor of online learning. What, specifically, were the social and technological changes that led you to change your mind?
    3. What technological changes are next when it comes to improving education, and what are the thresholds, in your mind, that need to be reached before you’ll change your mind again?
  6. Deirdre McCloskey has a famous essay on how it is all but impossible to get an undergrad student to do economics. Would you agree with that claim?

On Tyler Cowen and His Work/Worldview (16 minutes)

  1. Our field remains unsure of what principles of differentiation rule how “culture” and “economics” will be related in a particular problem. How should this influence how principles of economics ought to be taught to undergraduates – or indeed, anybody learning economics for the first time?
  2. What should be taught less in a first year graduate sequence, or maybe just taught less, period?
    1. I cannot remember where I read this, but I think the story goes something like this: Alex Tabarrok suggested starting a blog, and you responded by saying let’s write a textbook first. What are the strongest arguments that make Twitter, on balance, a positive force for the world? (I had this backward! Turns out Alex Tabbarok suggested writing a textbook, and Tyler Cowen said they should start a blog first)
    2. You had a post in 2007 about how to study economics in one’s spare time. How would you update your answer today? MRU (or its substitutes), but how should a noob think about what to learn more of, less of – and why?
  3. Are vouchers a bad idea for American education, or more generally speaking? How should we in India be thinking about developing a voucher system, or should we abandon the idea altogether?
  4. Calculus, statistics, programming, Shakespeare and the Bible were your picks when it came to the question of what, at the minimum, one should take away from schooling. The audience we’re speaking in front of today is about the same age as Yana was back when you wrote this post, only a little older. We’ll generalize/localize the Bible, but has your choice changed 17 years down the line?
  5. You had a post on teaching with blogs in 2005. It contained this line: “we are programmed to remember interpersonal exchanges better than written or spoken drones.” One,  your own Bowie moment, so congratulations, but also a question: at the undergrad level, what is the ideal mix of drones versus interpersonal exchanges, and how should we be thinking about it?

On Travel, Arts and Culture (16 minutes)

  1. Is a culture that values honorifics less likely to be a culture of excellence? 
    1. How should one square this with the fact that at least some street food in practically every Indian city is excellent (as opposed to the Philippines).
  2. How does one get better at asking stupid questions while traveling, and how does one maintain the quality of stupid questions as one’s travel increases?
  3. Choices choices: I give you two options, you must choose one, and I must guess which one you’ll choose. You must also explain the reasoning behind your choice. As with your game, so also with this one: feel free to pass on any or all.
    1. Pakistan or Bangladesh, the more exciting growth story from South Asia
    2. Re: pretty much any situation, Alex Tabarrok’s intuition or a really good model, and you cannot give the Samuelsonian response!
    3. A food trip to a part of India you’ve not been to yet (Orissa, perhaps?), or a food trip to a part of China you’ve not been to yet.
      1. On a related note, who in your opinion is India’s answer to Fuschia Dunlop?
    4. For any major city in the world, you get to visit it, but must give up one of the following: the food from that city, or museum visits while in that city. (Paris, if I must pick the city.
    5. Overrated vs. underrated or choices/choices, which game is more fun to play?
  4. If you had to recommend places to travel to within India for an Indian undergrad students, which places would you recommend? What mental model would you recommend they adopt to choose the destination, and what to do at the destination?
  5. Your next book is about recruiting better. What advice do you have for students about getting recruited better?

Questions from students/etc (12 minutes)

  1. Would you prefer a version of The Book of Disquiet in which the thoughts were lexically ordered? It would obviously render the Disquiet part almost wrongly placed, but wouldn’t then would he be able to communicate more thoroughly?
  2. How would you define/what would constitute Social Mobility in a stratified society, especially like India?
  3. Can what we know of economics be taught to aliens? Is there a role for human values in economic thinking?

The Olympics and Economics

There’s something inexplicably uplifting about sporting success. Not only does it inspire — even if fleetingly — at an individual level, it fosters national pride, a feeling rarely experienced in our networked world of partisan sniping. India’s best-ever performance at the Tokyo Olympics gave me, you, and millions of other Indians a reason to chin up in these challenging times.

https://publicpolicy.substack.com/p/139-a-question-of-sports?

So begins Pranay’s essay today from his (and RSJ’s) excellent newsletter, Anticipating the Unanticipated. The essay is a rumination on the role of government in sports, and as Pranay rightly points out, the implicit assumption that most of us make is that government should play a bigger role in fostering an environment more conducive to sporting excellence.

“Fostering an environment more conducive to sporting excellence” ought to at least get me an interview with a consulting firm, so I’ll translate that into plainspeak. The government should spend more, and work more on building out better sporting facilities, hiring better coaches, paying our sportspeople more, and more besides – all so that we win more medals.


Pranays disagrees with this view (and I agree with Pranay). This job, he says, is best left to markets and society.

Consider the role of markets first. Not too long ago, cricket would be criticised by players of other sports for hogging all the popularity, attention, and resources. And then a commercial, entertainment-focused enterprise such as the IPL turned this argument on its head. The city-based league format pioneered in India though IPL proved to be a positive-sum game for other sports. It spawned similar leagues in several sports, even managing to bring back Kabbadi to primetime TV screens. This commercial model energised many sports in ways that no government medals could have done.
At the amateur level, reforms in India’s FDI policy finally brought world-class sporting retailers such as Decathlon to India. Earlier, the sports retailing scene was stagnant, with few old-style shops only catering to demands of select, mass-market sports. By getting out of the way, the government helped change the sports equipment landscape for millions of budding sportspersons in the country. In short, markets are critical to lasting sporting success.

https://publicpolicy.substack.com/p/139-a-question-of-sports?

I agree, for the most part, but with government support, about which I’ll write more in a bit. Pranay also makes the case for the third pillar to do its bit:

Take the role that the MRF Pace Foundation has played in producing fast bowlers in India. Or the contribution of the Tata Group in improving hockey facilities in Odisha. We need many more philanthropic initiatives of this nature.
Besides the well-established corporates, there are smaller non-profit organisations such as the GoSports Foundation and Olympic Gold Quest. These organisations sponsor and support talented Indian sportspersons so that they can become world-class. Perhaps, we need hundreds of such societal initiatives outside the government to achieve sporting excellence.

https://publicpolicy.substack.com/p/139-a-question-of-sports?

By the way, here’s a good (and fairly straightforward) paper to read on this issue:

Every four years it begins anew, the hand-wringing and finger-pointing over a poor showing at the Olympics. The only real uncertainty is which countries will feel the sharpest disappointment over their poor performances. After the
Barcelona Olympics, a headline in the New York Times read “Despite its 108 medals, U.S. rates mixed success.” In 1996, headlines in London trumpeted “Olympic shame over Britain’s medal tally” and “Britain in danger of being left at the starting line,” while in Mexico, Japan, Singapore, Colombia and Egypt, medal totals below expectations led to national self-examinations. After Sydney, in Canada the Globe and Mail bemoaned “Canada’s Olympic fears come true: Despite a few bright spots, athletes not only won fewer medals, they performed below their own and nation’s expectations.” In this paper, we ask the straightforward question of how many medals countries should be expected to win by considering what factors influence national Olympic success

https://www.nber.org/system/files/working_papers/w7998/w7998.pdf

Read the whole paper, of course, but here’s a key bit:

Over time, a country’s real GDP remains the single best predictor of Olympic performance. Population and per capita GDP contribute equally at the margin implying that two countries with identical levels of GDP but different populations and per capita GDP levels will win the same number of medals. While GDP is most of the story, it is not the whole story. Host countries typically win an additional 1.8 percent of the medals beyond what would be predicted by their GDP alone. The forced mobilization of resources by governments clearly can also play a role in medal totals. On average, the
Soviet Union and Eastern Bloc countries won a share of medals higher by 3+ percentage points than predicted by their GDP

https://www.nber.org/system/files/working_papers/w7998/w7998.pdf

As Pranay mentions in his newsletter, sure you could sponsor projects of national pride, but the opportunity costs are far too high.1.

But ultimately, economic well-being is a good predictor of doing well in the Olympics. So what can (and more importantly, should) a government do about increasing the tally of medals at the Olympics?

As with much else in life, just one thing:

  1. Grow the economy as rapidly as possible

… but that being said, help (state, markets or communities – or all three) is needed. This video, via MR (and remember, this is the USA), shows how difficult the economics of being an Olympian are:

If you can afford to help out, please do! 🙂

  1. He doesn’t put it like that, the phrasing is mine[]